Populism Getting Unpopular?

I know I'm late with this. I just returned from visiting a small Caribbean island, stuck in the 1950's.

When I left, it had seemed that Trump and European populists were continuing their march towards some sort of global revolution.

Fast forward to today: we started to see the US equity and fixed income markets finally come to the realization that the anticipated Trump objectives (read: tax plan, possibly deregulation, all the "good" Trump stuff, etc.) are not guarantees and that people/the markets have gotten ahead of
themselves.

Today's special: reversal of all Trump reflation trades. Pow, right in the kisser.

We can debate Trump in the comment section. For now, I want to shift the focus to other parts of the world. In the previous few sessions, we have borne witness to other populists stumbling as well.

Wilders disappointingly came in second in the Dutch elections, despite leading in February polls. In Germany, Martin Schulz - a heavy critic of Brexit and the "anti-Trump" candidate, unanimously won his party's nomination. His party, the SPD , has started to lead in polling. Lastly, Le Pen and Fillon are losing steam in France as Macron seems to be locked to take the election.

This makes me think. Are we seeing a local peak in populism or the absolute?

I'm not 100% sure - I have a guess but I'm going to keep that close to the chest for now...

With that said, regardless whether populism has seen its local or absolute peak - close your eyes and think...what would happen if Europe walks away from these elections with no right wing populist in top office?

My belief is that this is a contrarian view and can catch many market participants by surprise. Yet, I think it's starting to look like a real possibility. It will ensure EUR survival - either forever (practically speaking for macro investors) or for the time being (practically speaking for tactical FX traders). Both the long term and medium term charts look supportive.

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I'm not sure I'm buying the reflation rally/Trump dump narrative. It may be icing on the cake, but the fundamentals probably matter more. Monetary leading indicators have predicted weaker US growth and stronger relative growth in Europe and China for a while now. Shorter term leading indicators have supported this. We're due weakening Q2 and maybe Q3 in US. Euro pushing higher (if politics pan out well) will hurt eurozone growth with a lag, so maybe Q3 looks weaker in Europe too. I would not put much weight on any ECB taper talk. Underlying inflation is going nowhere and headline will fall towards it when base effects fade out later this year. Who knows we might get another deflation scare like early 2016 if oil plummets to 30s.

I think underlying the hype fundamentals are driving the prices. Maybe more so than in a long time. I'm bullish long term on economy. These look to me like normal fluctuations that get narratives plastered on.

Lot of profit on the reflationary table care of equities and an overcrowded dollar trade. What's the surprise if volatility goes up from here. It could hardly go down any further. Frankly I would have thought it's irrelevant what the impending news might be that might persuade some people to start moving to bank something. Seasonally ,this is again something we've seen in years gone by.I said the other week (Nico took the other view) that the idea of Trump and the reality of Trump might have been enough sway marginal voters away from radical change.The guy just cannot get his foot out of his mouth. I was a pro Brexit ,but frankly if I was American I would be downright embarrassed to think Trump represented me to the rest of the world. This US centric policy of Trump could be a killer blow to the dollar if it is mishandled. The EU,China and Japan might seem an unlikely trumpherate ,but based upon the idea of the enemy of my enemy is my friend it isn't an impossibility if Trump wants to try and alienate them all. I wouldn't want to join the group of people who have mistakenly called the death of the dollar in the past ,but I would have thought it clear that the dollars status as the reserve currency of the world shouldn't be taken for granted.

regarding our difference on French populism, Macron underperformed Monday night marathon debate (3 hours !!) being so defensive, so nervous taking every attack personally like the little nerdy kid that he is. His 39 years of age (!!) are showing here. Not presidential material one bit.

le Pen kinda sounded like a broken record, but held the ordeal pretty strongly. Fillon was the best of all but with 'aggravated fraud' claims now doing the round he might never make a comeback

so it looks like Macron-le Pen on second round and frankly, i do not think Macron has convinced that much. We ll see how many peeps end up voting AGAINST le Pen dividing tone. I do not remamber who is long CAC here, but timeframe will have to be extended, for they will run some weak hand stops into election second round, guaranteed

I note instead of 'triumverate' I wrote 'trumpherate'. Talk about a Freudian slip.

Nico, I don't pretend to have insiders knowledge of French politics. I get it that perhaps more than most European countries French voters may have been swayed by the effects of accumulated terrorist attacks. I'm just not convinced at this point that's enough for France to elect it's own version of Trump. There's still enough of a sense of Gallic pride in France which I think would be averse to Pen Le Trump bringing down embarrassment upon their National image. That is why I mused that Trump had perhaps given populism a bad name in 2017. If there is one European country that I think might kick over the traces then for me that country is Italy. Italy's got history in finding no problem with being led by a character that is 'Trump like'. I think they are much more unpredictable at the ballot box.

Yields are falling. Oil prices melting down may have been the trigger for the reversal in rates. We think this factor is at least as important than Trump Fatigue, if not more so. We predicted this, and you were able to read it here first, if you were paying attention to our call to Buy the F/I Dip...

Pretty soon there will be a massive curve flattener and an almighty short squeeze from 5s to 30s, as certain "Gentlemen" remember that after all, they do prefer Bonds (except maybe PR munis). Once we break through the resistance cluster around TLT 122, the surge into the long end will be absolutely epic b/c of the massive scale of the short interest.

As for equities, at the very least we will see a massive rotation out of reflation vehicles and into rate-sensitive sectors such as REITs, preferreds and utilities.

Don’t blame politics for the stock market’s turn south. The stage was set in the options market at the end of last week, says Marko Kolanovic, the widely followed head of derivative and quantitative strategies at J.P. Morgan Chase & Co. In a Tuesday note, he reminded clients that he had previously warned that the expiration of options could “lift the lid” on subdued market volatility and put downward pressure on stocks.Friday marked the quarterly “quadruple witching” event and after expiration, Kolanovic says the put-call “gamma imbalance” shifted toward puts for the first time in around five months. That shift left the market “free” to move again, “hence, it should not be a surprise that today, for the first time in around five months, we have a meaningful down move and intraday acceleration.”

The S&P 500 SPX and Dow Jones Industrial Average both fell more than 1% on Tuesday, the biggest one-day decline for both indexes since October. The declines broke a 109-day streak of settlements without a 1%-or-greater fall.

Kolanovic said the S&P 500 option gamma imbalance turned around $20 billion toward puts on Monday, “significantly contributing to the selling.” He noted there was also a break in short-term, or one-month, momentum that may have inspired “modest equity selling” by commodity trading advisers, who employ momentum-trading strategies. An uptick in realized volatility, meanwhile, is starting to cause outflows from volatility-sensitive investors, he said.

Meanwhile, a pullback by bond yields, which fall as bond prices rise, could reflect short covering by speculators who had placed record bets that bond prices would decline, he said. Falling yields and a flatter yield curve have been blamed for a selloff in financial stocks on Tuesday. Kolanovic warned that the bond short covering could inadvertently provide a “’fundamental’ narrative to this largely technical selling.’” The market is entering a vulnerable phase, with increased volatility potentially contributing to further equity outflows, said Kolanovic.

And while political headlines flew fast and furious Tuesday over the fate of a Trump-backed health-care plan and France’s presidential race, he maintains the price action Tuesday was “primarily technical and should not be fitted into a political narrative.”

The news out of retail just gets worse every day. It's footwear's turn today. Payless is about to file bankruptcy. They have 4K stores! Finish Line and Foot Locker are puking due to Nike's bad news from last night.

And Sears is a going concern today. Ha, who would have known? Someone should tell poor Eddie Lampert.

Now, let's dig a bit deeper into what FedEx said about Amazon building its own delivery infrastructure. They said they are not going to suffer from that as they are 85% b-2-b. Really? I don't remember a CEO ever saying good bye to 15% of his biz just like that. On the call they also said last qtr they increased their capacity in preparation for customers to ramp up shipments but brick and mortar had a soft holiday season. Well, there goes the other 85% of your business down the drain. You can drive a FedEx truck through their FY2017 guidance of a $0.50 spread. TNT Express my rear end... Le Pen wins and off the face of the earth will fall your trucks. It's a sell for me on this bs relief rally.

LB - What do you see as the follow-on to a Spring 2010 redux? Agree that fading base effects (as I believe fe2plus mentioned) and oil's continued slide are helping the bond argument.

Defensive performance has been impressive given the surging sentiment. Tightening commercial lending standards have a benign uptrend across all firm sizes as debt-to-EBITDA (1.88 I believe as of end of Q4 16) grows larger. MM had a good piece about the lag between survey data and lending, but hope/optimism is nowhere to be found on the balance sheet... the debt overhang, however, is clearly there. I don't see how this plays out favorably even as election uncertainty fades and companies presumably act on the sentiment/hope/optimism and head to the banks for credit to finance grand projects and border walls and whatnot.

i have no insider knowledge either. Not at all, I try to observe. I predicted and traded both Brexit and Trump. I would LOVE to be right on le Pen of course, my book is geared this way but it doesnt need le Pen, the true empty nature of Trump will suffice.

one point: le Pen is nowhere near Trump personality wise. Trump grew up sheltered and groomed, he was always the millionaire player, models, golden stucco and all that. Le Pen grew up with an absent, asshole father, and they barely escaped assassination when she was 8. Litterally, their townhouse blew up.

She was bullied all her life because of her asshole dad. She has very thick skin. She has no lifestyle. She has no ego at all. She really does not say anything extreme. She is not an embarrassment at all, that's a tremenduous difference compared to 'look at my hands, the rest ain't small either' "equities are in a bad ugly bubble' 'look, equities are up because of me' Mexican fucking wall Trump

I left London today. And then that shit happened. Sick to the stomach, this shit will never end but honestly, there is no way in hell we should just shut up and move on. Law and Order, we need to go down one notch in civility. Le Pen will win, and there will be tons of cars crashing around, and machete attacks. They she will clean up the country.

It's going to be horribly ugly but it's ugly enough already if you know what i mean. If this shit aint gonna end, we might as well fight back in all our might. Sorry this is written under a 'je suis charlie blablah' state.

Replying to koolbong's query yesterday on -EURNOK. My case is largely reversion-to-model, specifically the regression on real rates and Brent. Interestingly, the Norges Bank's new inflation forecast sees 2.2, 1.3, and 1.2% in '17-'19 despite its 2.5% "over time" target. Yet, their rate path is flat because the NB is rightly worried about further stoking the housing/credit bubble. Unemployment and economic activity are both heading in the right direction, which also keeps them patient. So that's your real rate piece, which is supportive. As for oil, if US shale can really balance the market with <$50 break-evens for the next years, then OPEC is doomed. But until the Saudi Aramco IPO is done, I imagine the Saudis will support the market. So, I think it's too soon for the bottom to fall out of the oil market, if that is in fact the end game. All that said, I took the position too soon and got run-over 2%. Biggest mistake was not waiting for a bigger shakeout given NOK is a very crowded bet (according to DB's CORAX #s) on a very crowded oil bet. Live and learn.

On EUR, I just have so much trouble getting excited about it. The bull case seems to be Le Pen loses (which she certainly will) and all this pent-up desire to play European cyclical strength drives it up. But does that really happen, or does the focus then shift to the real issue, which is Italy. 47% of Italians think the euro is a "bad thing" versus 41% who think it's a "good thing." 5-star, despite the Rome mayoral debacle is at 35% while the PD has splintered. That means 5-star just needs to pick up another 5% and it gets bonus votes giving it a lower house majority. The upper house is still proportional, so I don't know how much 5-star could get done. Could it, for instance, call a referendum on the euro with just a vote of the lower house? I also note that 5-star combined with right-wing euro-skeptics already have a 49-point-something-%. I just have to think there's a very good chance Italy exits the eurozone in the next recession. Dissenting views?

Lefty - you are right about the 2010 analog I went and looked at a few different asset classes leading up to it - seems like we are running 1-2 months ahead but the patterns are uncannily similar - of course just because two patterns start out similar doesn't mean they end the same way, but I do see the argument for the long end. Oh, and that implies QE4 may be coming by Q4 - see that crafty play on words? Now that MM doesn't post here I am killing the low bar.

So I added to my homebuilders short today. My conviction got stronger. Simply put, yesterday's LEN report confirmed what I've been yapping about for a while - margins are compressing. I get the increased volume this, premier builder that. No putting a lipstick on this pig: lose Mexican workers and you are dead. Add increased cost of building materials and non-existent vacant lots to that. Well, dead men are walking now, a dead group that is, I am short XHB. To further add to that, existing home sales crapped in Feb., down almost 4%. Do you think higher MTG rates had anything to do with that? You bet, MTG apps down 2% last week. I think buyer fatigue may finally be settling in. NE sales down 14%! Affordability issue is taking the forefront here. The homebuilders took a note of LEN margins yesterday and there was no bounce today with existing home sales pretty much killing any interest in bottom fishing. Chart is looking toppish here, monthly doji action in effect but we still have some days left, obviously. You got daily mid BB holding on closing basis but that could be history soon. 50 dsma is a full point below here and by then it's breaching below the prior double top at 35.80-ish. Sell this loser and pick it back up @ $28.

Heads up! Equitues may rally tomorrow on this. The real question will be what the Senate thinks about the changes being made at the last moment to please the FC. Not a bad idea to sharpen your pencils and put the fibs on whatever it is you are looking to short.

abee, HC vote tentatively scheduled for 7 pm eastern tonight. That is if there will be one. Currently 27 are Nays. We have a whole day to decide what to do. I have core shorts built on fundamental views. I am not worried about this vote. Would like to trade futures around it though, especially if it fails.

Johno, are you using 1y fwd 1y real rates in model? What is the stability of the regression coefficients (eg. if you use different windows of data, how much do they change)? Probably interesting to plot oil's relevance for the pair over time

EU equity indexes are pushing up to new highs (having reversed all of Tuesday's fall). The SP500 etal is also pushing up strongly today hemorrhaging Nico's account (again). So did you all buy the dip? Or were you too taken in by your constant childish self-reinforced doom-mongering?

We have the biggest equity bull market in history in full swing, backed by every global central bank and f*ckwits here still try to sell. Too funny for words :)))

Good questions/observations. I'm using 5Y swap rates (I think I found a better fit than 1Y1Y) and core inflation rates. You're right that coefficients change depending on whether we're in a low (e.g. Brent <$70) or high oil price regime, with the oil coefficient being higher and rates coefficient lower in the former and vice versa. That makes economic sense since Norway's oil project break-evens are comparatively high. While EURNOK is still on the cheap side using coefficients from a low price regime, the mis-pricing is less than if using coefficients from, say, a regression on the last 10 years of data.

So Ford pretty much confirmed peak auto today. This should take a toll on rails, imo. I think NSC takes the biggest hit on lower auto sales news. Closed below 100 dsma. Only the ninth trading session below 100 dsma since one year ago. It has whole a lot to fall from here, stops below 106 are next. And don't forget CSX, let's fill that gap (at least a half of it) ten bucks below.

Trump got behind the wheel and drove FDX truck off the cliff in the afternoon. Ten previous trading sessions were engulfed in one daily candle. Once YL was history there was no stopping this freightliner. Horizontal @ 190 is gone, so is 100 dsma. Stops below 184 are next.

If the U.S. healthcare legislation overhaul is not passed, or is postponed, it will put "a lot of doubt" on the "Trump trades," which include higher U.S. equities and bond yields, Jeffrey Gundlach said.

"Surveys show that people believe the (Obamacare) repeal is the most likely part of Trump’s agenda to be passed," Gundlach told Reuters. "So if you can’t pass the repeal, everything else is in doubt for sure."

Investors have been bracing for Thursday's floor vote scheduled in the U.S. House of Representatives, with safe-haven securities including Treasuries and gold seeing price gains on Wednesday. Trump and Republican congressional leaders appeared on Wednesday to be losing the battle to get enough support to pass the Obamacare rollback bill.

Gundlach repeated his recommendation that investors would do better selling U.S. equities into any kind of stock rally and diversifying into emerging markets. He noted that the iShares MSCI Emerging Markets ETF has outperformed the Standard & Poor's Index by over 4 percentage points since early March.

Gundlach said Tuesday's stock-market slump illustrated how "investors are questioning whether the pro-growth U.S. policies are really going to happen."

Healthcare first was a mistake, obviously. At this point, it may be better to let it die so no time and political capital is wasted in the Senate amending it. If the Republicans can spin this as getting them to tax reform quicker, I don't see this being reason to sell the market (there are other, better reasons for that, though I'd personally advocate selling longs, not selling short). Gundlach has form, but he's (perhaps necessarily because he sells bond funds) a glass half-empty guy.

That said, I'm clearly not in the head of the average American who's been piling into ETFs the past couple months. Maybe their sentiment does hang on Obamacare repeal. We'll see.

HH seems to put a lot of faith in central banks. That's nice. I look around the world and I see all the major central banks tightening/tapering and the Fed maybe starts shrinking its balance sheet later this year. Meanwhile, US corporate balance sheets are levered up, valuations are high. But maybe it'll take the appearance of inflation before this blows ...

what a farce!If Donald has to threaten to resign to get the votes on his first bill that so vociferously argued against during the election campaign I can only imagine what comes next ...This is even worse that the Greek charade of late night parliament votes ahead of the next Eurogroup ...

If you are a trader you absolutely have to read MM comments section. We have called the AHCA failure for months here. Not taking a victory lap, simply stating the fact. Just sit down and watch Trump's inaugurational speech. Think about who he chastised and they just answered back. Now you tell me, who is the boss??

Obviously, now several things come to mind, and more questions than answers at this time because the wheels just came off the wagon today. By the way, this perhaps is the reason why the market is still up here and not 10% down (no HH, not simply because of Fed), because the answers are not that clear just yet:

1. One of the most important questions for me and not sure can be gauged before the new number is released, but how much of the increased biz sentiment was due to cohesion within republican party and a quick Obamacare repeal? Take those surveys tomorrow morning and you would see an enornmous drop, I say.

2. How much of the AHCA failure play a roll on BAT? Ryan is a BAT guy. He is damaged by what happened today, this was his bill, seven years in making too. But, he has BATman (Bannon) on his side, and Bannon won today but defeated Ryan on AHCA, as we now read from numerous articles. If this in itself is not confusing than I don't know what else is! More questions than answers on this one as well, because now that Obamacare repeal does not free up tax dollars to devote to the tax reform it may just be a Tax Cut-lite if no BAT and cause a minimal positive affect on the market, i.e. 35% going down to 25-ish% won't quite move the needle.

Now, it should be added that 17 senators have already strongly opposed BAT (so simply a no go) and this should no longer be a reason for retail sector to be selling off the way it did in the last few weeks. This is something to monitor closely and in absense of major political news for a while the market is giong to put a magnifying glass on the sector and try to figure out why the heck are the consumers not spending like they did? After today's debacle and clear indication of cracks within a governing body should one even be wondering why? This goes back to sentiment and confidence, take that UoM survey tomorrow morning and see it crater, imo.

3. What about infrastructure now? That's $1T of new spending once again not yet possible because AHCA was pulled. Infrastructure bill was not going to be a huge market mover but still. XLB head and shoulders action is telling us something.

4. I also think that deregulation, especially Dodd-Fuck repeal just got that much more iffy. Watch GS, it is telling us something here, besides the yield curve flattenning. Lowest close of 2017.

Hope the market comes around IPA, loaded up on more May VIX futures today.

Current implied pricing for SPX on first round of French election is about 0.8% off a high of like 1.6% one month ago, following Macron's polls up.

Marko Kolanovic of JPM out with a note a few days ago highlighting that, post Mar expiry, the put gamma imbalance (SPX strike-dependent dealers' net gamma position... Dealers sell puts to institutions, are given calls by overwriters) has gone to negative gamma, which in theory says we're capable of seeing much more realized vol, my suspicion but intraday increased ranges might be telling ... Side note: An individual dealer can run anywhere from 300mm to 1 bln of notional SPX, depending on its mkt share of overwriting flow, creates a lot of push-back against SPX moves in either direction, particularly when stocks rallying gently (aka the enemy of macro)... Blame pension fads and the Fed caused SuperQuest for yield...

Couple with corporate buyback blackout period coming up as earnings season soon, and quant realized volatility based stock/bond switch allocation models (eg vol control, risk parity, variable annuity books at insurers) and you have the makings of a potential sell-off like Feb-ish 2016...

Now if we can just get that push...

Can anyone but HH make the argument for long SPX here? Don't want echo chamber thoughts... I've heard this bill was designed to fail to make tax reform easier, but seems to evil genius for me

Did you see Paul Ryan on the Inauguration Day? He was so happy that Obama left he forgot he had to deal with Trump. Look at him today. I don't think he would have written his own eulogy on purpose, because that's what AHCA was. I really like the guy but he made a huge mistake. He miscalculated how fast Trump/Bannon would throw him under the Mack truck. Check out Trump's hilarious truck pics from yesterday ;) I am astonished why Ryan allowed them to force him to take a gamble today! Has he not seen what happened to Trump casinos? "House" does not always win. There is no rebounding from this without a sacrificial lamb. Paul Ryan is it, I am afraid.

All this talk about a quick tax reform is so ludicrous after AHCA got pulled. The Republican Party is in full-fledged crisis, a complete point of disarray. There will be a blame game for weeks if not months to come as constituents will need to know who's fault it was when their votes were thrown into a garbage bin. There is zero chance to reconcile what happened today. Your party had a total control of government and you failed to pass your own law which you have been writing for over seven years.

Let's be realists, they all forgot that Trump is not a part of them. He cares less about Republican Party and simply needed a win. He literally knew nothing about AHCA and went into the room full of career politicians to strike a deal with them, only a few months after imbarrasing them in front of the whole world. It did not and will not work! The sooner people undestand this the less money they'll lose.

Trump can't have stock market go down, as I've said here before - the only thing going for him since the Election Day. So it was his/Bannon's calculation to have a failed vote quickly and move on to keep the market up by talking about the "massive" tax reform. Brilliant plan! It worked perfectly on Friday afternoon and bought them weekend to spin things. The spin started immediately as Trump said "not my fault". Only one yuuuge problem going forward - not a single person now will have the trust and the patience. The first time you hear any meaningful friction within Republican Party on tax reform market players will run to the exits en masse. That day is coming very soon, imo.

"So it was his/Bannon's calculation to have a failed vote quickly and move on to keep the market up "I think you are overestimating Trumps tactical abilities. I have seen nothing that does not at this point label the man a 'trainwreck'. What you highlighted that is extremely relevant though is the fact Trump is not anything like your average Republican. If it had been possible the man would have tried to get elected as an Independent ,because that is what he really is. Simply too egocentric to play well with others and by playing well with others we are talking about uniting the Republican party. He's just produced a massive fail on that issue so what we now know is the control some people thought the Republican had doesn't actually exist. Contentious policy of any kind may not happen. I suspect even one more policy fail and there will soon be media noise that a significant portion of the Republican party are trying to oust Trump from his presidency.

There was something a little too hurried about the announcement to move to tax reform next - like you said, he knows the jig is up if the balls can't be kept in the air. Checkmate nailed it with the Biff from Back to the Future II analogy.

On taxes basically Bannon will say lets impose an import tariff or something BAT like and Cohn will say hell no. No idea who wins but I think Trump would ideally like to team up with democrats and moderate republicans to spend like a drunken sailor and blow up the deficits via tax cuts with no offsets, and throw in some infrastructure to boot - there are two problems - 1) I don't think there are enough dems who would come to the table because their base would flay them alive, and 2) they are starting $1.5 TN in the hole because of this failure which means if they don't fund cuts then by next year they are paying an extra $300-400 BN in interests annually which is a sizable drag especially since healthcare costs will only rise - if this was a company it would be Enron circa 1999.

I also feel Biff's, sorry Trump's intellectual laziness is a pretty big impediment - he is pretty easy to run circles around by anyone who has the actual ability to put together a plan and then distract him with shiny objects, which means congress gets the edge on initiatives since they have the resources - I don't see this changing in the future.

The markets are at an interesting juncture - I never underestimate the ability of US equities to find a bullish excuse till the frying pan is literally striking the face. That said, on the areas equities are excited about I would frankly argue Trump's biggest challenge is precisely that sentiment is too sanguine, and there is no immediate crisis for him to be able to hold over the tea party - u really think the 'freedom' caucus would be allowed by the general public to run around waving their underpants if financial conditions were imploding (as an example)? - just remember Bush 43 was able to achieve his very minor tax cuts, not comprehensive tax reform, in the guise of a stimulus package with the backdrop of:

a) Full ownership of congress with no tea partyb) A recessionc) A country completely united in their approval of him primarily because of 9/11d) A much better fiscal, and frankly demographic backdrop with China showing clear signs of breaking out as a global juggernaut

As far as I remember, DC hasn't done anything of significance without a crisis to goad them since 1986 - good luck!

One thing is clear, yesterday's debacle gave these dead cat insurers and hospitals a new yet short life to live: LPNT, UHS, QHC, CYH, THC, CNC, MOH, HCA. Trade them for a few weeks or so of relief rally while shorts cover and govt scrambles to figure out how to carry out the executive order to stop Obamacare tax dollars bleeding. Everyone forgot that it was the first one Trump signed on Inauguration Day. People's memory is so short :)

While you are at it, add these REITs as long as 10-yr is not above 2.6% and is declining: OLD, HTA.

Let's laugh it off and thank God we are allowed to trade and to be both short and long. This shall pass, America is already great!!

Physical Feats: “Obamacare repeal is a 53-inch vertical leap,” he said. “It’s humanly possible, but there’s no practical way I’ll ever be able to do it.” He bent to touch his toes, a trader’s gut smoothing the slow descent. “Not sure I could do it even with a trampoline,” he admitted, eyeing the free weights. “Tax reform is a 400lb bench press,” he said, straining to slap a 45lb plate on the lonely bar. “It’s been done. Just not by many people. But there’s no shame in putting up 300lbs, and Trump could even claim victory by pressing 250lbs. That would be something.”

Physical Feats II: “But here’s the thing, when you set your sights too high, and come up really short, you tend to stop trying so hard,” he continued. “When you attempt to leap the wall full speed, but hit it face first, you don’t tend to do it again.” Trump has made a habit of attempting feats that most people don’t. Now he’s trying to do a lot of them simultaneously. And he needs congress to spot him. “No one can do all these things. Few people can ever hope to do one. And it’s about to start getting really obvious to everyone watching that Trump is no exception.”

Yes, we all stated here that Trump would not be able to execute. He is not the Republican party and therefore cannot be viewed as in a situation where White House, Senate and House work together. This is more like the situation if a Third Party had won the White House, as Ross Perot tried to do years ago. If he had, he would also have experienced this kind of legislative gridlock.

I don't know that we can easily predict any market reaction other than FX. The dollar's rise was predicated on tighter monetary policy coupled with fiscal initiatives. We are likely to see that move reverse, and a lot of coupled trades may unwind with it.

IN any case, all in all we are looking at a much less reflationary 2017-18 than was predicted. You know what that means for the enormous number of bond bears. Several of us here enjoy the aroma of roasted bond bear…. a dish to be savoured.

From what I've been reading in the last 48 hrs, only Congressional tax reform plan is being considered so far and BAT is an integral part of it. A lot of parallels drawn lately with the tax reform under Reagan and the boost it may give the economy. Has everyone forgotten 1986 tax reform mistake? Back then little thought was given to unintended consequences of removing the tax shelter. Real estate went into a downward spiral and culminated with S&L debacle and a recession. If BAT goes through it may become a nail on the retail sector's coffin. It may even cause a quick recession and subsequent bailout of retail CMBS market, but it is not that large to begin with, so probably no major shock to overall financial system.

Futures are puking. Traders had plenty time to rethink major consequences of AHCA failure and I am sure the realization that Ryan may resign/be pushed out just like Boehner is sending a chill down their spine. Interesting enough, Trump did not call for his resignation and told people to watch Fox News anchor who did. No Ryan = no BAT = no tax cut. After AHCA failure any tax cut has to be revenue neutral or it will not happen at all, imo. This being said, I saw that Meadows (FC leader) said today that tax cut does not necessarily have to be totally revenue neutral. Perhaps a development needed to be watched closely and may be the result of Trump's anger and his threat to work with dems. Schumer said it'll only be on his terms. Yeah, good luck with that!

Taking profits on half of my NQ short and NG long. Will sell half of my UNG calls tomorrow at the open. Would like to ride the rest of NQ to 5300 and NG to 2.30

my gap moment is fast arriving. As written before, noone is already short this market, and probably noone would be comfortable to short this hole. Ergo, this lift is going down empty, like it always does after an euphoric market top.

in spite of the Harrys a.k.a. Antifa brigade of MM forum (treating anyone questioning this rally as a fascist) I reiterate my view that the Trump Globex reaction low of 2030 will be revisited this year, the only event that would keep the Fed from hiking further

note the panicky, massive short cover on bonds by folks gunning for safety. Wish the board a good week

Universal Portfolio, the case for long SPX may be 1) post WW2, there haven't been big bear markets starting more than 13 months before a recession (or so I keep seeing written) and the world economy is in a China-driven upswing currently, 2) buybacks (I've seen lower #s lately, but I wonder whether that's companies not using authorizations that would support the market lower), 3) still supportive central banks (last week's TLTRO made up for this year's taper to 60b, by the way), 4) dropping healthcare and moving to taxes may increase chances of latter getting enacted this year. Whether that forth point is correct, I don't know. I do think it was pretty clear the bill was going to fail by the afternoon Friday and yet the market didn't sell off much and even rallied on the news. That said, retail has been the big driver of this market the past couple months and maybe we only see their reaction with some delay, starting this week. For my part, I'm short SPX against the CAC.

Futures and Asian markets are puking right now, but I'd like to see how markets develop starting the NY session. Often Asia sees things "half empty" and then NY sees them "half full."

@johno, interesting pair trade. I am kind of perplexed by rotation within SPX and went for NQ. Also, want to be tactical with Trump themes and trade around announcements like the one possibly coming up on Tue. Want to short KOL on that. Think that a double top is setting up. Look at the daily wick on post election crazy volume reaction spike, so much memory on that day. The $0.87 wick is probably getting filled half way or full and you've got a sweet risk/reward there, especially in puts (but they are a little thin so prob just trade the underlying). I'll scale into it in between. Coal ain't coming back like Trump thinks. My 2 cents...

Gus my guess is that they will take their bloody lucky quarterly profit before a volatile second quarter made of '????'. They have painted the tape long enough on a big bowl of bullshit hopium.

Johno nice one - there is a strong overperformance from Europe vs. US this year but you gotta pick your European piece carefully. To boot Dax, the usual favourite benchmark, is lagging painfully. The bid is on Spain, i would have spread a short Spoos with vibrant Spain, not France but best of luck

it would be ironical if the failure of Trump - precipitating Spoos' fall - were the saviour of Euro equities by making incompetent populism much less attractive in Europe i.e. the le Pen threat evaporates

i don't see that a week in France talking to tons of friends and family. Le Pen is far far from gone. Banking darling Macron disgusts people as far as i can see. His social track record is abominable, he (of course) refused to push further retail/investment banking separation when he was Finance minister. He is cancer, it is not obvious at all that he'd win a second round vs. the candidate of the Little People. for now

I hear you IPA, re oil. I like the MLP's here as well. Bought a little last week, offside slightly on MPLX. I'd love to buy RRC or NFX if they break lower.

I'd like you short yen soon as well. Sure I see the bull case for EU. Yen doesnt make sense to me. Sure trade it off yield differentials/curve differentials. But BoJ aint doing nothing. Any thoughts from the board on Yen?

Scaled into 1/3 of position on TLT short as of this morning. Thinking this crazy talk of no revenue neutral tax cut scares Yellen & Co into more preemptive hikes or at least Fedspeak spin of one. Only a tester at this point. Want to see 121 & 120 taken out for the other 2/3 entries. Will add ONLY if the trade goes my way. Want to target 116. I think we may be stuck in a 116-122 trading range, a box.

I'm spanish and I know little about expresing my ideas in writed english but I'm going to try it.

Since Trump victory, and cause I live the European's issue inside of one of "indebted problems" I thinked as you in this post: populism seems to be a "smoke fear" of MrMkt and in 2019 nobodys'll remind it, populism isn't winning any big election (without Us, Spain, Netherlands, Germany's municipals/regionals, and even in France Le Pen seems that she won't win).

But this means the Max Alarm level of populism isn't triggered in the present. There other bad effects of populism (and effects that could create in a post time, the max alarm level of populism) one of them is to be inside the [insert the x legislative/executive system of y country] and paralize it, like Musolinni and Hitler seated in their respective parliaments and froze it (making the government unable to react a bad economic enviroment, making it worse).

There are "hard"/heavily fragmented congresses/parliaments in Uk,Us,Spain,Italy,Greece,Netherlands. And more important, hard/heavily fragmented legislative organs with populism set inside it.

This is dangerous, obviously less dangerous that a populism victory, but dangerous (and dangerous in a way that consensus could think: ey, populism isn't winning, and defold their "populism expectatives". For in a X time, (IF) the current low alarm of populism'll degenerate a max level alarm of populism, force MrMkt to reamek its "populism expectatives" this kind of "tricky realities"/"not linear event's lines"/"heavy reevaluations" move the markets.)

But I'm a spanish student and I know nothing...Jhon Snow (sorry I have to finish the sentence).

Ray Dalio in his last article/paper called Populism: The Phenomenon its so interesting, cause they find that a heavily fragmented legislative organ is a perfect broth for a max level of populism.

I say let's laugh it off. We need to, otherwise it gets depressing with every new leak of what happens behind the scenes. You can't make this stuff up! I am surprised that Trump has not put a deal together with Fox News for the new Apprentice "The White House" edition. Everyone would watch. It would solve so many problems, would generate a nice revenue to offset a tax cut, would put all "fake news" outlets and Twitter out of business, and would boost his ratings. LOL!

On a more serious note, can you imagine getting these people to agree on anything? And this is just within Trump administration and no Congress involved yet. Spicer said today that tax reform would be done by August. Give me a break!!

Another case of Asia seeing it "half empty" and then the US seeing it "half full," as I suspected. People will point to this and that, but in the end, Trump and Ryan still seem to be working together, the Freedom Caucus isn't hung up on revenue neutral tax reform/cuts, and markets are giving them the benefit of the doubt. Maybe those doubts grow, and I wouldn't think it rational for the market to hit new highs until the tax bill is much further along, but then I suspect this whole move is an irrational retail-driven over-belief phase so WTF knows.

We're probably all too focused on Trump anyway. It reminds me of '09 where everyone was focused on the US economy and meanwhile China was saving the world with epic fiscal stimulus. Again, China has stimulated and world growth is responding. Look at, say, EM Asia ex China/India NON-tech industrial production ... it was going nowhere for years and boom, it's broken out dramatically. That it occurs when Trump is elected is coincidental. Just saying, maybe we shouldn't be so focused on Trump when the 800 pound gorilla of world growth (China, NOT the US) is making itself felt (probably right to say that the US is still the 800 pound gorilla of financial conditions though).

All that said, I see China slowing by this summer and that slowdown will be felt with a lag in rest of world. But markets could make hay for a while longer.

abee asked about the yen. I bought some USDJPY put spreads a week ago, but I don't think that really works out unless LB is vindicated in rates. On rate spreads, USDJPY looks cheap.

By the way, some may say the '09 comparison ignores the fact that SPX was at 700 then and we're at 2340 now. Sure. Not saying market is going to start a huge bull market here. Merely that people are generally reluctant to sell their stocks when the global economic cycle is picking up, so the retail investors who believe in Trump have had to bid stocks up high to bring out enough supply.

if i remember well Ryan was the first to 'dump' Trump after the 'grab'em by the pussy' release. There was no hesitation, in an instant they saw a sinking ship and Ryan was first to jump out. The Donald remembers that, he is obsessed with loyalty so no, do not expect those two to work together ever

johno you have a point about markets' obsession with Trump but let's remember Trump was the only reason this last leg up happened in the first place. It is a bit rich to use Trump as the only reason for animal spirits on the way up, and dismiss Trump on the way down. Like using Fed on the way up and dismiss Fed on the way down. It has to be the same logic for there is no relay.

from my 20 years experience you can NEVER trade DM markets short term based on China. It is hard enough to trade China based on China. I see it as a completely opaque system with massive accounting makeup and a shadow banking system the size of California

regarding US equities the way i see it (book talk) we had a clear impulse down last week, the fist in ages followed by a very week retracement. Then quite a horrid weekend gap down where VIX short sellers got obliterated. Now it is almost Pavlovian for equities shorts to cover at any significant gap down because there are so rare (last one was Trump election day) so we had the gap close that you called right

the short term trend is up on oversold but the intermediate trend is down since last week 'wake up' candle until proven wrong so longs should look to trim their pos those days, no-one should consider trying to make coin longing such a late stage of the rally. Once this quarter is done we're left with record high sentiment into May season with le Pen in the middle. Good luck

Nico, just saying the sellers in this market are reluctant sellers because (being more "sophisticated" institutional types) they know what the global PMI and global data surprises are doing. The buyers are retail (who don't know anything about China, but think they know something about Trump) and while it remains to be seen, the healthcare bill may introduce enough doubt in their minds that they stop buying. I doubt they turn around and sell until right away, but the buying impulse may be gone. For choice, I'd be short that turd, the Russell.

By the way, interesting pieces by James Montier posted at www.gmo.com on secular stagnation. Pretty divergent views, which are refreshing to read.

Dow futures up +200 odd points yesterday, up another +130 today... they just shot up +20 ticks as I wrote this sentence. How are all your equity shorts looking fellas? Nico must be down a few hundred grand a day... The algos have certainly done their job well, suckering you into the wrong side of the market while they JBTFD for the 6 millionth time :)

Nico, in your analysis of US equities, why dont you mention earnings? Tell me when FB/AMZN and GOOGL all miss and then you will have your sell off. As for my SPX calls, lets settle in September. I frankly have no idea if US equities topped or not.

The 2017 Dollar bull trade looks DOA. EM FX, aside from zuma's party yesterday, looks pretty strong given what oil has done in past few weeks. XLE has 2 nice days (good call IPA). I wonder if that was it..

You little fuck we do not need market comment we all have screens. Why do you care so much if i'm up or down?

the only constructive input from a bull's perspective is where you'd exit your (paper) trades and/or where and when you would buy a dip. If you had a position you were probably shitting your pants on that week end gap down

to boot you are either shitting your pants in silence, or triumphing here at every uptick while we the grown up debate our positions live no matter if above or under water. Do you get the difference? no, because you write like a 12 year old

You guys had to remind me about FB? Had a stop on full position. Really upset at my trade execution on that one :(

abee, thanks, I was stalking this XLE trade for a while, as you know. Mr Market played me like a violin and stopped me out and reversed on the last quarter of my short position on it. I was watching the last leg down empty-handed. So I am having a nice revenge with my new long on it but only scaled in 1/3 so far. My plan is to add to it either on b/o above daily mid BB or @ $67-ish. Really don't know yet if that was it.

HH, respecting people you trade against and staying humble is the way to remain in this game (or profession for some of us). You had a nice trade, good for you, but no need to rub it in.

I think though that this morning's Consumer Confidence # is now going to be the high after AHCA failure and more possible Trump/Ryan infighting still coming up. Not complaining thought, as it's helping my TLT short at the moment. Let's see what happens in next month's survey. Also, UoM Consumer Sentiment Final March # on 31st may catch some of AHCA saga consequences, and if too late for that then April Prelim definitely will. This equities ramp up did stop me out of my short NQ remaining half.

Yeah, I am with Pol as a spectator on equities for now. Still long fixed income though - and still laughing at the HOT soft data and waiting for the inevitable COLD hard data describing a (gradually, almost imperceptibly) slowing US economy.

Btw, wtf is up in Manhattan retail? Never seen so many empty store fronts, except late 2001 downtown, or during a ["R-WORD"]. Interesting.

LB, I dont think you can correlate shop front to retail activity anymore. Whilst the Mrs still likes to touch and feel fashiony things I HATE shops (and shop assistants) and do as much as I can online.

the whole UK bleating about the death of the high street is noise. It's dying because it is no longer needed. Turn high streets into apartments and restaurants rather than retail chains and the places come alive again. It's simples.. we need more homes and less shops, so turn shops into homes. duuurrr.

Polemic, while I am with Leftback on retail. It is starting to smell bad, both the reasons and the consequences.

While it seems like apts and restaurants would be a great idea and would be an easy fit in urban settings like NYC, the task of filling the growing retail vacancies is getting increasingly harder to achieve under current conditions for a myriad of reasons, some of which I'll list here.

1. Apartment tightness index has been in contraction since January. Saturation in major metropolitan areas and cities like NYC has gotten to historical levels. Apt rents have been stagnant or declining in multiple top "hot" rental markets throughout the country since mid 2016 as demand has not kept up with new supply.

2. Since we are discussing Manhattan and generally commercial zoning, it's obvious that multifamily conversion is the way to go. While it's been a big driver of new residential construction since GFC, multifamily housing starts took a huge dive in the last couple of months (sequentially down 5.5% in Jan and 7.7% in Feb) and they pretty much peaked in mid 2015. CRE lending on multifamily has been greatly restricted lately (and not only because of higher interest rates) and it is much harder for developers to obtain conventional financing on new projects now. Some say it's the worst they've seen since 2008. While lending alternatives exist they are not that easy to obtain, especially when you have a project which involves so many variable moving parts like converting a retail hole into a multifamily, besides the fact that in Manhattan ground floors are very hard if not impossible to convert into an apt space as they are a part of an office bldg.

3. Your other suggestion, restaurants have been in recession for a while. December of 2016 saw the worst SSS (same store sales) numbers in five years. More and more folks are now shopping at upscale grocery stores and dining at home. They hop on to Aldi, Whole Foods, Trader Joe's, or Fresh Market and cook the stuff at home to avoid high ticket of going out and the food scares we've had in multiple restaurant chains. Sit down dinner restaurant experience as we used to know it is slowly going away. Smart management teams like DRI, which reported and hit ATH today have quickly repositioned themselves for what I am describing. They bought Yard House (glorified beer pub chain) to offset their core dwindling casual dining traffic. They added to that with Cheddars acquisition today. Interesting concept where they cook everything from the scratch while generally younger patrons wait and load up on booze at a very extensive bar. Booze joints with higher margins is the way to go. So more breweries/pubs and less sit down restaurants in the future, edpecially when driverless cars roll out in numbers. The thing is how many breweries can we have on the block though? Gotta be a bubble of some sort going on in that space and it's harder to get them approved in the middle of town any more, even in Manhattan. Also, keep in mind the ungodly high rent they would have to pay, pushing an avg of $917/sq ft for a ground floor lease. Some of those holes in Downtown/Midtown Manhattan are forever unfilled, imo. Furthermore, banks have been closing retail branches in unprecedented numbers, adding to ground floor rent erosion.

4. Probably the most important point about our retail discussion is that online shopping can't replace brick-and-mortar fast enough and the monstrous amount of store closures throughout U.S. (and not only in cities but also in suburban malls) will eventually cause the damage to economy. Besides the retail CMBS market possibly needing a bailout at some point, retail trade employs 16 million people who will be greatly affected. These folks are going to lose their jobs and cause a big slowdown in consumer spending further causing a slowdown in retail sales and adding to more store closures (resulting in a downward spiral). I don't care how low-wage those jobs are, they are all included in NFP each month.

Irony. Following on those Montier (who seems quite Keynesian) pieces, I picked up "Where Keynes Went Wrong" by Lewis. Reading it, I was reminded of a thought of Nietzsche's -- that every philosophy (or in this case, economic theory) is an expression of the writer's biases/values. Then the irony struck me. Keynes seemed to detest this Bertie Wooster-like idle aristocratic "rentier." In his conception, these lenders had the power and set terms. But after decades of Keynesian policy, the "rentier" is now the middle class retiree. The idle do-nothings are the borrowers who put 20% down for a giant house and make 10x in a decade for sitting on their asses, err assets. There are other borrowers -- the corporations, owned by idlers, which jam the rentiers with cov-lite PIK toggle rubbish (who's got the power there?). As Montier has pointed out, little borrowing actually funds capex (vast majority is done with internal earnings). There are poor people who borrow to consume, but Keynesian central bankers driving rates down another 2% don't make a material difference to them (what's the difference between a 400% or 398% APR on a payday loan? either way, you are f-cked). The icing on the cake is that Keynesian bubble-blowing massively enriches those who take a cut of transactions of assets, i.e. finance people, real estate agents, mortgage brokers, lawyers (but hey, at least they DO something, unlike the asset-wealthy, who are just ass-sitters).Anyway, all this to say that in trying to kill off Bertie Wooster, Keynes created a whole class of idlers (asset-wealthy borrowers) and screwed the middle class retiree.